Subhasri Sriram, Executive Director and Chief Financial Officer, Shriram City Union Finance said cheaper capital and lower wage bill aided June quarter earnings.
The company's net income rose 14.6 percent to Rs 573.08 crore and net profit grew 15.6 percent to Rs 147.7 crore.
The company is moving towards more market-oriented products than traditional bank products, Sriram said. The focus is on small enterprise segment, which performed well in the quarter gone by.
She told CNBC-TV18 the two-wheeler segment remains a focus area despite its growth declining 7 percent in the June quarter.
Sriram expects the company to maintain the 13 percent income growth in coming quarters. She does not see any big challenges in asset quality across segments.
Below is the transcript of Subhasri Sriram's interview with Ekta Batra & Anuj Singhal on CNBC-TV18.
Anuj: A word on your net interest income growth. It was healthy at about 15 percent? What is the likely trajectory going forward?
A: We have seen positives on all fronts. The asset under management (AUM) growth on year-on-year (YoY) basis has grown by 16 percent. We were able to maintain this growth without any compression in our yields while at the same time we have got benefit of little bit of reduction in our cost of funds though the spreads have been maintained.
However, at the same time we have seen some reduction in our opex, on other employee cost and similarly we have seen good amount of traction on YoY, the provisions and write-off has come down by 3.4 percent while at the gross non-performing loans (NPL) number, we are at about 3 percent but on year-on-year comparison the provisions and write-off together is about 3.5 percent.
Overall on profit before tax (PBT) level year-on-year basis we have seen a growth of almost 18 percent.
Ekta: Can you tell us about what the cost of fund was this quarter and how much has it reduced quarter-on-quarter (QoQ) and year-on-year and what would you project for the entire FY16?
A: If you compare from March 2015 number to June 2015, we have taken steps in two to three things - Firstly, we arecontinuously moving towards more market oriented products than traditional bank products while at the same time we have bank lines and keep those options open and we are still waiting for the banks to completely match the market rates.
However, in terms of market borrowing, we are looking at both commercial papers (CPs) and long-term non-convertible debentures (NCDs) - a mix of both and on that product the rates have come down to 50-60 bps. On the balance sheet as a whole, almost 22-25 bps reduction compared to March 2015 on incremental borrowing and overall borrowing.
Ekta: What would your outlook on net interest margins (NIMs) be? Would you manage to maintain it above 13 percent or improve it by the end of this fiscal and similarly for your spreads? Can you detail it for this quarter in particularly and your outlook for FY16?
A: Though we would love to exceed the current numbers, we can say with a lot of positive that we can maintain this 13 percent spread. While we are working at growing the balance sheet, we should be able to manage the spreads without any compression.
Anuj: What segments have you seen the best growth and going forward which are the segments that you are most bullish on?
A: We continue to focus on our small enterprise finance. I think that has done very well this quarter. Its relative the last couple of years has been slightly lukewarm compared to our previous year quarters. So we have seen some pick up in that segment.
A bit of a disappointment more to Shriram City's own benchmark performance was in two-wheelers space but nevertheless we continue to be the market leader in that space. In the states we operate we continue to maintain our leadership position and we definitely are focusing on that product and that will continue to be a star performing product for us.
Two important products which will continue to grow over the market, outperform the market is our small enterprise finance and two-wheeler book. Gold, it stabilised, it continues to perform but growth is yet to come on that space. We will have to wait for some time on that.
Ekta: Give us an outlook on your gross non-performing loans (NPLs). It was largely stable at 3.2 percent. What contributed to the gross NPLs this quarter and in which segment? What is your outlook for FY16?
A: The good news is there were no big challenges across the products. I do not think there was a big jump in the NPL numbers. It is more or less around this range for almost a year now, but as I said maybe the disappointment is we do not see much of our customers moving from non performing and non standard to standard in one go.
We are seeing a bit long drawn process to get the customers back. So would expect the tenure getting stretched and unless the macroeconomic conditions changes dramatically.